The Euro and the British Pound edged lower in overnight trade, down 0.2 and 0.1 percent against the US Dollar as the greenback capitalized on safety demand after Chinese GDP figures pushed stocks lower across Asian bourses (see below). We are looking for losses in EURUSD as well as positioning to enter long USDJPY.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

2:00

CNY

Real GDP (YoY) (1Q)

9.7%

9.4%

9.8%

2:00

CNY

GDP Constant Price (QoQ) (1Q)

2.1%

-

-

2:00

CNY

Consumer Price Index (YoY) (MAR)

5.4%

5.2%

4.9%

2:00

CNY

Producer Price Index (YoY) (MAR)

7.3%

7.2%

7.2%

2:00

CNY

Retail Sales (YoY) (MAR)

17.4%

16.5%

11.6%

2:00

CNY

Retail Sales YTD (YoY) (MAR)

16.3%

16.5%

15.8%

2:00

CNY

Industrial Production YTD YoY (MAR)

14.4%

14.1%

14.1%

2:00

CNY

Industrial Production (YoY) (MAR)

14.8%

14.0%

14.9%

2:00

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (MAR)

25.0%

24.8%

24.9%

4:30

JPY

Industrial Production (YoY) (FEB F)

2.9%

-

2.8%

4:30

JPY

Industrial Production (MoM) (FEB F)

1.8%

-

0.4%

4:30

JPY

Capacity Utilization (MoM) (FEB)

2.9%

-

3.6%

The Australian Dollar underperformed in overnight trade, sliding as much as 0.34 percent against the major currencies, after Chinese Gross Domestic Product figures surprised to the upside, showing output increased at an annual pace of 9.7 percent in the first quarter. While the result marks a slowdown from the three months through December, it is far stronger than the 9.4 percent reading expected by economists ahead of the release. Meanwhile, Consumer Price Index figures showed inflation accelerated to 5.4 percent in March, the highest since July 2008.

Taken together, the data set stoked expectations that Beijing will step up efforts to cool the buoyant economy amid lingering fears of overheating, bearing down on investors’ outlook for overall global economic growth. The Japanese Yen outperformed as the risk-averse mood spurred an unwinding of carry trades funded in the perennially low-yielding currency. The MSCI Asia Pacific regional benchmark stock index fell 0.7 percent.

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:00

EUR

Italian Trade Balance EU (€) (FEB)

-

-786M

Low

8:00

EUR

Italian Trade Balance (Total) (€) (FEB)

-

-6554M

Low

9:00

EUR

Euro-Zone Consumer Price Index (MoM) (MAR)

1.3%

0.4%

Low

9:00

EUR

Euro-Zone Consumer Price Index (YoY) (MAR)

2.6%

2.6%

Medium

9:00

EUR

Euro-Zone Consumer Price Index - Core (YoY) (MAR)

1.1%

1.0%

Medium

9:00

EUR

Italian CPI - EU Harmonized (YoY) (MAR F)

2.6%

2.6%

Low

9:00

EUR

Italian CPI - EU Harmonized (MoM) (MAR F)

2.0%

2.0%

Low

9:00

EUR

Italian CPI (NIC incl. tobacco) (MoM) (MAR F)

0.4%

0.4%

Low

9:00

EUR

Italian CPI (NIC incl. tobacco) (YoY) (MAR F)

2.5%

2.5%

Low

9:00

EUR

Euro-Zone Trade Balance s.a. (€) (FEB)

-3.6B

-3.3B

Low

9:00

EUR

Euro-Zone Trade Balance (€) (FEB)

-4.0B

-14.8B

Low

Euro Zone Consumer Price Index figures amount to the only bit of significant European economic data to cross the wires through the end of the trading week, with expectations calling for the reading to match flash estimates of an inflation rate at 2.6 percent in March. Barring a significant revision to the upside, the outcome is unlikely to yield a significant reaction from price action considering its limited implications for the ECB rate hike outlook. Indeed, considering the flash estimate for March came out just before an increase in borrowing costs, the implications of faster price growth over that period have already been validated and priced into the Euro exchange rate.

On balance, traders are likely to look ahead toward US Consumer Price Index figures due in the second half of the session, with expectations calling for the annual inflation rate to hit a 14-month high of 2.6 percent in March. Importantly, the core CPI gauge – which excludes energy – is expected to yield a far more modest increase to 1.2 percent. With that in mind, the implications for the uptick in the headline figure for Federal Reserve tightening expectations is likely limited considering a number of voting FOMC members have already dismissed energy-driven spikes in price growth as a reason to unwind stimulus, hinting any move higher in the US Dollar will need to come from risk aversion and not yields for the time being.

Separately, US Industrial Production is expected to accelerate, with output adding 0.6 percent to yield the strongest performance in three months. Finally, the University of Michigan Consumer Confidence gauge is tipped to show sentiment rebounding in April after hitting a 16-month low in March. For their part, the markets appear unsure of how to feel about the data set just yet, with stock index futures tracking the S&P 500 equity benchmark flat and hinting at indecisive risk appetite trends heading into the week-end.